Toilet paper prices are on the rise again, and the blame can be laid on an unlikely culprit: the housing market slump.
The housing slump has fueled a lumber crisis, with futures plunging more than 60% over the past 12 months. Due to this the saw mills are getting closed. In Canada, the world’s largest softwood lumber producer, about a third of sawmill capacity is now closed in British Columbia.
This is causing ripples in the global paper supply chain, which depends on by-products produced at the plants. Now, the world is facing a squeeze for wood pulp — the raw material for products like bath tissue.
Pulp costs are rising globally, and toilet paper makers including Kimberly-Clark Corp have implemented price increases in an effort to boost margins. According to NielsenIQ, US retail prices for toilet paper are expected to increase by nearly 20% from July 2021 to the end of last year.
The toilet paper saga shows how difficult it is for global supply chains to bounce back from the snarls that have rattled commodity markets over the past few years. Increased volatility, a pandemic-induced logistics crisis and Russia’s invasion of Ukraine have led to wild price swings and some raw material shortages. This underlines why it has been difficult to contain supply-driven inflation.
In lumber, the market started to slide in 2021 after a dizzying 2021 record high. The turnaround caused producers West Fraser Timber and Canfor to become inactive or close operations in British Columbia. It is a region that produces a premium type of pulp known to give a comfortable feel to high-quality toilet paper. Canada accounts for about half of the global production of this type of fiber, called northern bleached softwood craft.
“It’s really a shame the mills are down,” said Joe Nemeth, manager of the BC Pulp and Paper Coalition. Companies can’t substitute the fiber for a lower quality fiber and get the same strength and softness in the tissue because “it’s not something you want to use at home if you want to blow your nose or blow your nose.” Want to wipe the back,” he said.
Brazilian pulp company Clabin confirmed on Thursday that producers of softwood pulp worldwide have raised prices by $30 to about $970 per metric ton amid a tightening market.
Consumers are trying to cope with higher toilet paper prices by switching to cheaper brands, buying smaller packages or simply cutting back.
A Barclays analysis of NielsenIQ data shows that retail unit sales of Kimberly-Clark toilet tissue declined 2.9% in the three months through Jan. 28, as the company raised prices by 9.7%. Georgia-Pacific experienced a similar decline.
Kimberly-Clark, which makes bath tissue, paper towels and other products such as diapers, said in late January that the new hikes had been implemented without specifying the products involved. The company has also reduced the number of packs and the number of sheets on some products as it seeks to manage higher costs.
The good news for consumers is that there are signs of relief ahead.
Kevin Mason of ERA Forest Products Research said the closure of the Canadian sawmill is currently strengthening the pulp market, but the impact on prices will eventually be balanced by weaker consumption and higher supply from northern Europe.
Patrick Cavanagh, senior economist at Fastmarkets, estimates that producers in Sweden and Finland are adding 1 million tonnes of production capacity per year by the second half of 2023. He said that this would completely compensate for the loss in Canada, even if the shutdown continues there for a year.
“The question now is whether tight market conditions will develop before the new capacity comes on board,” Cavanagh said.
Source: www.latimes.com
